Services grow at fastest pace for six months

The UK services sector grew at the strongest pace in six months in October, according to the latest PMI.

The IHS Markit/CIPS UK Services Purchasing Managers’ Index hit 55.6 in October, up from 53.6 in September and against the no-change position of 50.

Firms reported improved order books and resilient client demand against a background of improved domestic demand and new product launches.

Overall input cost inflation eased to its lowest since September 2016, though higher prices were associated with food, energy, transport and staff salaries.

However, job creation slipped to a seven-month low and confidence about the year ahead remained muted, linked to economic uncertainty and worries about business investment among clients.

Duncan Brock, director of customer relationships at CIPS, said: “A mixture of forces were at play this month in the service sector, which reported the strongest growth in new business since May, but optimism remained subdued and there was a squeeze on profit margins as input prices continued to rise.”

Chris Williamson, chief business economist at IHS Markit, said: “The good news was that October saw business activity across services, manufacturing and construction grow at its fastest rate for six months. The data point to the economy growing at a quarterly rate of 0.5%, representing an encouragingly solid start to the fourth quarter.

“However, a downturn in business optimism about the year ahead, fuelled mainly by Brexit-related uncertainty, suggests that risks are tilted to the downside as far as future growth is concerned.”